Which of the Following Reasons Might Explain, at Least in Part

question 11

Multiple Choice

Which of the following reasons might explain, at least in part, why changes in federal tax revenues tend to mitigate changes in aggregate demand?

• A) The federal income tax rate is computed as a proportion of disposable income.
• B) Federal income tax rates are progressive and thus increase with disposable income.
• C) All kinds of taxes discourage work and thus reduce GDP, but the income tax creates the smallest of these work disincentives.
• D) The federal income tax is constructed so that the middle-class taxpayer pays the largest share.
• E) None of the above.

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Definitions:

Depreciation

The methodical distribution of a physical asset's cost over its lifetime, indicating its usage, deterioration, or becoming outdated.

Fixed Asset Turnover

A financial ratio that measures a company's ability to generate net sales from its fixed-asset investments, such as property, plant, and equipment.

Favorable Trend

A pattern or movement in financial metrics indicating positive progress or improvement.

Unfavorable Trend

A pattern or movement in financial or operational data that suggests a negative direction, potentially indicating problems.